Plastered across shop windows along São Paulo’s main Paulista Avenue this week is one word: ‘liquidação’ (sale). Stores in Brazil’s biggest city are offering discounts of up to 90 per cent as they frantically try to clear stock after the worst Christmas in a decade. Retail sales during the week before Christmas rose 2.7 per cent — the lowest increase since 2003 as inflation and rising debt levels scared away customers, according to Serasa Experian.
But last year was not only a disappointment for Brazil’s retailers. Data this week show that 2013 was the year that everything changed for Brazil. The end of the commodity supercycle and expectations of a tapering of US monetary stimulus signalled an end to the era of easy liquidity that had masked Brazil’s flawed economic policies and helped sustain its exhausted model of consumption-led growth.
A recent report from Brazil’s central bank on showed $12.26bn left the country last year — the biggest net dollar outflow since 2002. That follows data last week showing that Brazil also posted its worst trade balance in 2013 for 13 years. On Tuesday, Brazil’s national automakers’ group Anfavea reported that car sales last year fell for the first time in decade. Even beer consumption in Brazil, the world’s third-biggest consumer and producer, is expected to have dropped for the first time in 10 years, according to Ambev, Latin America’s biggest brewer.
Brazil’s stock market posted the worst yearly loss among the world’s 20 biggest equity indices last year, according to Bloomberg. Meanwhile, the corporate sector reeled from news of the bankruptcy of Eike Batista’s oil company OGX, which triggered Latin America’s largest-ever corporate default.
For economists, though, Brazil’s fateful 2013 may prove to be exactly what is needed. After 10 years in power, the ruling Workers’ party (PT) will be forced to turn to more market-friendly policies, which would stimulate the economy and employment, to hang on to the country’s newfound prosperity and secure its own re-election later this year, they say. One of the biggest disappointments for investors has been the government’s reliance on consumption to drive growth, particularly the car industry. Since the PT took office in 2003, Brazil’s fleet of vehicles has doubled to just over 80m, fuelled by a series of incentives to persuade the new middle classes to buy their first car.
Source: TransUnion – A member of BIIA